Category: FinTech

Mastercard has joined forces with R3 to develop a blockchain-powered cross-border payments system connecting global faster payments infrastructures.

In an announcement on Wednesday, Mastercard said the two firms have signed a deal to develop and pilot the payments solution. The collaboration plan brings together Mastercard’s payment systems assets, brand and distribution with R3’s blockchain expertise.

The partnering firms want to tackle industry issues such as costly payments processing, liquidity management and a row of standardization and connectivity issues between banks and domestic clearing systems.

R3 CEO David E. Rutter said:

“All institutions – large or small – rely on the ability to send and receive payments, but all too often the technology they rely upon is cumbersome and expensive. Cross-border payments can be a particular pain point.”

According to the press release this is part of Mastercard’s plans to strengthen its cross border payments network, expanding on its recent acquisition of global payments company Transfast earlier this year.

The collaboration with R3 is part of the payment giant’s multi-rail strategy, which aims to improve worldwide connectivity in the account-to-account interactions.

The latest deal adds to this by providing access to R3’s Corda ecosystem, which includes more than 300 of the world’s leading financial services firms, technology companies, central banks, regulators and trade associations.

Peter Klein, Executive Vice President of New Payments Platforms at Mastercard, stated:

“Our goal is to deliver global payment infrastructure choice and connectivity as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3. It confirms our commitment to innovation, both home-grown and through partnerships and acquisitions, to support advances and innovation in the increasingly complex global payment infrastructure space.”

David Rutter, CEO, R3, added:

“Corda was designed specifically for enterprise use cases such as this, and we look forward supporting Mastercard in bringing blockchain-enabled payments businesses across the globe.”

The R3 agreement comes just days after Mastercard joined the blockchain-based Marco Polo trade finance network. The card firm’s rival Visa is also working hard in the space, recently officially launching its distributed ledger-based, non-card platform for high-value corporate, cross-border payments, B2B Connect.

USD-pegged stablecoin issuer Tether is looking into releasing a new version of the digital currency backed by a basket of commodities including gold, crude oil, and rubber, Zhao Dong, an investor of Bitfinex, revealed.

Reported by Cointelegraph, the stablecoin issuer is considering the move to reduce dependency on storing fiat at traditional banks. As revealed in a lawsuit, the sister company Bitfinex had transferred around $850 million to payment processor Crypto Capital, which had been frozen by authorities, leaving a gap in Bitfinex’s books.

The stablecoin issuer, Tether, made headlines after granting a $700 million loan to Bitfinex, which was made public by the New York Attorney General’s office earlier this year. The exchange hasn’t retrieved the money yet, although its representatives are firmly optimistic of the outcome.

The company has been under constant pressure with allegations of not maintaining enough reserves to back the USD-pegged stablecoin. Squashing all allegations, Dong told the publication:

“Tether is fully backed by reserves, out of 4 billion existing USDT about 3.35 billion are now in securities and 650 million are being lent to Bitfinex. Bitfinex has been raising 1 billion with it’s LEO token IEO and could easily pay back Tether any time (as a matter of fact it already paid 100 million last month).”

In addition to the commodity-backed currency, the company is planning to create a stablecoin that is pegged to the Chinese renminbi. Dubbed CNHT, the new stablecoin’s reserve will be held in a bank in Belgium and will be launched very soon, possibly within weeks according to the report. Dong also stated that CNHT will have no issues with the capital control policy from China’s Central Bank:

“CNHT will not interfere with PBOC [People’s Bank of China} capital control policy because CNH is different than CNY, as it’s already an offshore product. On the contrary CNHT will help China to expand the adoption of CNH for international settlements.”

Now that Bitfinex was able to raise $1 billion in USDT through the sale of its LEO token in mid-May, the firm started paying back the loan that it got from Tether. However, Bitfinex plans to recover the funds that have been frozen at Crypto Capital Corp. before full payment is issued, according to Dong.

In the meantime, Tether remains under investigation from the New York Attorney General for covering up the $850 million loss.

Blockchain company R3 announced its partnership with Dubai fintech startup Wethaq, with the goal to build a next generation financial market base for Islamic markets.

According to the news, Wethaq is targeting Islamic Financial Markets and is aiming to use R3 Corda’s blockchain to manage the pre-sale, issuance, management and financialization of Sukuk securities. The Sukuks are an Islamic financial certificate, similar to the western bond, which comply with Islamic religious law known as the Sharia.

Based on the International Islamic Financial Market Annual Sukuk Report 2019, the total issuance of Sukuk reached $123.15 billion in 2018, showing a 5% increase from $116.7 billion in 2017. In addition to that, it has been estimated that the total sukuk issuance in 2019 would be the same as the previous year.

Although charging interest may be prohibited under the Sharia Law, rent is not. As a result, some Sukuk monetary certificates function like bonds (‘ljara’). However, instead of paying interest, these Sukuks are sometimes issued at a discount and are tied to an asset which is then leased. Most of the lease payment goes to the investors. Therefore, at maturity, they yield a capital gain. This makes Sukuk securities, one of the most sought-after investments.

Similarly to bonds, Sukuks have somewhat manual issuing processes. Therefore, Wethaq began working on a proof-of-concept for a blockchain solution to the Sukuk management, which would not only comply with Sharia, but have the distributed ledger operate as a registry plus the central securities depository.

The solution aims to digitize Sukuk using Corda which will lead to decreasing both the cost and time of issuance, a process that currently involves input from a number of institutions. For instance, the decentralized platform seeks to take on the roles of a registrar, CSD, trustee-delegate, paying agent, calculation agent and transfer agent.

Furthermore, by standardizing the digital assets with global financial architecture, it could lead to wider distribution, and therefore more issuers and investors. Overall, it would help improve interoperability and establish a network for customers, providers, and regulators to communicate.

On that note, the CEO of R3 David E. Rutter has stated that blockchain is currently driving an unprecedented period of innovation across capital markets, with more assets undertaking complete digitization.

He further added:

“Saudi Arabia and the wider Middle East region are areas where we see huge potential for Corda to modernize the economy and our partnership with Wethaq is a step towards achieving that.”

Mohammed Alsehli, the CEO of Wethaq, also comment on the partnership with R3 as well as the goals of the firms. He stated:

“In building the next generation of financial market infrastructure for Sukuks we have found a valuable and trusted partner in R3 and its Corda Enterprise software. Our joint focus is on building world-class financial infrastructure in Saudi Arabia, in alignment with the Kingdom’s Vision 2030, and the UAE, pursuant to their ambitious fintech agenda, before we expand to the entire Middle East and South-East Asia.”

FINMA, the Swiss financial watchdog has approved banking and securities dealer licenses to two new “crypto banks”. SEBA and Sygnum are two companies entirely focused on working with blockchain-based products and have been cleared to operate at the same level as traditional banks, making them effectively the first crypto banks.

First Licenses Awarded

FINMA published the announcement on Monday, this being the first time it has issued such licenses blockchain-focused companies. The awarded licenses allow SEBA Crypto Sygnum to provide services to institutional customers as well, marking a major milestone for the digital asset industry.

SEBA says it will be operational in October once it fulfils secondary criteria requested by FINMA. It plans to offer corporate and asset management services for the new asset class.

Sygnum, headquartered in Zurich, is working with the German stock exchange, telecoms operator Swisscom and other partners to list and trade tokenised securities on a distributed ledger technology platform.

“Being awarded the banking and securities dealer licence from FINMA is a significant milestone, and an important step towards the institutionalisation of the digital asset economy”, said Manuel Krieger, co-founder and CEO of Sygnum Switzerland.

AML Restrictions Extend to Crypto As Well

At the same time, the Swiss Financial Market Supervisory Authority (FINMA) issued rules on how to apply anti-money laundering regulations to the banks “where the inherent anonymity of blockchain technology presents increased risks”.

The watchdog agency clarified that the existing rules to check money laundering will apply to virtual asset service providers (VASPs) including exchanges, wallet providers, and trading platforms.

This restricts the transfer of tokens to people the bank knows. According to the guidelines, the blockchain-based service providers are obligated to verify the identity of their customers, to establish the identity of the beneficial owner, and to take a risk-based approach to monitor business relationships.

“FINMA-supervised institutions are thus not permitted to receive tokens from customers of other institutions or to send tokens to such customers. This practice applies as long as information about the sender and recipient cannot be transmitted reliably in the respective payment system.”

The Swiss financial centre has for the last couple of years been gearing up to provide a blockchain-based infrastructure to trade the new digital assets. The Swiss stock exchange operator SIX plans to launch a new platform next year while several start-ups have also sprung up in Switzerland.

Following these initial license awards, other companies are expected to take advantage with applications already submitted by Bitcoin Suisse, Crypto Finance and Lykke.

Multinational financial services provider Mastercard has recently added three senior-level positions amongst other positions onto their career website with the goal to develop cryptocurrency and wallets solutions.

According to the company’s career website, Mastercard is looking to fill in the position for a senior blockchain engineer and engineering lead, director for product development and innovation, as well as vice president for product management and director of product management for cryptocurrency and wallets.

Based on the job descriptions, the new recruits will work with a cross-functional team comprising of Franchise, Compliance, Regulation, Products, Labs, Regions and Technology to develop new products and solutions.

The director for product management – cryptocurrency/wallets, will be expected to “lead the ideation, definition, design, and development of innovative crypto currency solutions, including wallet solutions,” and to have already had an experience managing cryptocurrency wallet products.

Whilst the company has yet to disclose full details of the planned products’ scope, they do indicate that the new hires will be asked to identify solutions and concepts that have strategic fit and value to Mastercard’s customers and partners.

Other senior roles such as vice president of network tech product management, director of payments platform and networks, senior analyst for strategic program management, mention the need for expertise in blockchain technology. In addition to these top-level roles, the company is also seeking blockchain engineers and analysts with knowledge in blockchain.

The future hire for VP in product management for blockchain/crypto should notably have experience with current payment systems as well as be familiar with relevant industry standards and regulatory requirements, according to the job posting.

Overall, all roles will be required to closely monitor evolving trends in the cryptocurrency industry and initiate solutions for new technological developments as well as emerging risks.

Meanwhile, it is noteworthy to mention that Mastercard is one of the 27 inaugural members that have expressed their intention to join the Libra Association— a consortium established to govern Facebook’s planned stablecoin project, Libra.

Mastercard has been dabbling with the blockchain technology over the last couple of years. In 2017, it announced that it was opening its blockchain to merchants and banks to experiment with a new payment network. Last year, the company hired 175 engineers, including people with expertise in blockchain.